Creating an estate plan is far more detailed than simply creating a will and throwing in a trust or two. If the estate plan includes putting assets in trusts to avoid probate and minimize taxes, it’s critical that the assets be retitled so they are owned by the trusts and not the individuals.
When you purchase a house, you purchase the title to the home. It’s an important legal document concerning the transfer of property. In an estate plan, how accounts are named, or titled, is a critical part of changing the asset’s owner from a person to the legal entity that is a trust. This is an important step in the estate planning process, says The Black Hills Pioneer in a recent article, “Titling of property is just as important as your Will or Trust.”
There are some kinds of property that, depending on how they are titled or who’s the named beneficiary, will flow outside your will or trust.
For instance, if you designate a beneficiary to your life insurance policy or on your retirement account, that money goes directly to the named beneficiary at your death—not in accordance with your will or trust (provided you haven’t named your estate or trust as the beneficiary).
In addition, you could designate another person as payable on death (POD) designee or transfer on death (TOD) designee on your investment account or your bank account. These types of accounts also transfer automatically to the named designee and not with any regard to your will or trust (unless you named your estate or trust as the beneficiary).
Any jointly owned real estate will typically flow to the surviving joint owner, not pursuant to your will or trust. However, the fact that two people own one piece of real estate doesn’t mean the property will flow automatically to the survivor. It depends on how the property is titled. For example, in South Dakota, language needs to be included in the deed conveying that real estate to both individuals as “joint tenants with rights of survivorship.”
You can, therefore, see how critical it is that you discuss these issues with your estate planning attorney. In addition to questions about wills and trusts, you should also be discussing the titling of your property and the beneficiaries you’ve named on your life insurance and retirement accounts, along with any POD and TOD designees you’ve named on your investment accounts or bank accounts.
By completing this final task of your estate plan, your family will receive the protection that you had wanted. Without doing so, your legacy may go unfulfilled.
Reference: Black Hills Pioneer (August 5, 2019) “Titling of property is just as important as your Will or Trust”